At a Glance

• FTC replaces noncompete rule with case-by-case critical review approach
• FTC solicits comments to guide its enforcement efforts to which interested employers should respond
• FTC’s new approach warns against casual noncompete use
• Basic guidelines to reduce risk of FTC scrutiny are provided

The FTC has now withdrawn its appeal of the Ryan, LLC v. FTC decision.¹ The FTC’s ill-fated attempt to completely ban noncompete agreements by administrative rule is history, but that does not mean the federal government’s attempt to regulate this normally state-law-oriented subject is over. Just ask FTC Chairman Ferguson, who warned employers this past week that “[t]he failure of the Biden Commission’s rule does not mean that employers are free to impose noncompete agreements willy-nilly.”²

This article provides some guidance on how an employer might pass the “willy-nilly” test and avoid being characterized as an employer that abuses the use of noncompete restrictions. First, it is important to understand the FTC’s apparent shift in focus.

Is the handling of noncompete contracts back in the hands of the states where it has been handled for the last 100+ years? Nope. It has become abundantly clear that the FTC is not done addressing what it perceives to be a problem with employers’ overuse of noncompete agreements. On September 4, the FTC announced its intent to pursue a complaint against Gateway Services, Inc. based on the company’s use of noncompete agreements.³ In...

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